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How to charge depreciation ?????

Gunjan Bhageria (B.Com, CA Final) (55 Points)

19 July 2012

Hey Guys,

I am stuck ,,, please provide me a valid solution keeping in mind the AS & IFRS in regards to this....

I have an Asset named General Equipment having an estimated life of 10yrs.... but I want to depreciate it for 5 yrs keeping the rate of depreciation unaltered...

Can u plz provide a valid solution to with with the explanation...

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1 Replies

Rathnavani (Senior Oracle Consultant) (21 Points)
Replied 20 July 2012

Hi Gunjan,

I assume the physical life of the asset is 10 years, but however there are circumstances under which Depreciation can be provided for less than physical life is the useful life is less than physical life. Physical life for the General Equipment is 10 years and the useful life is 5 years. You could charge depreciation for 5 years provided your need lies in any of the below mentioned factors:

i) any legal or contractual obligations

ii) directly governed by extraction or consumption

iii) depends on the extent of physical deterioration on account of usage

iV) change in technological conditions

v) change in market demand for product

vi) legal or other restrictions

Thanks

Rathna